Court orders release of 14 cheques 'resumed' by authorities, not 'seized' under Customs Act.

Case Name:

Nabco Batteries v. Commissioner of Central Excise(High Court of Delhi)

Key Takeaways:

- The court distinguished between the power of "seizure" under the Customs Act and the undefined power of "resumption" exercised by the authorities in this case.

- The court held that the authorities cannot withhold the cheques in the absence of a valid seizure under the Customs Act.

- The court directed the authorities to release the 14 cheques to the petitioner within two weeks, after obtaining self-attested photocopies. **Issue:** Whether the authorities can withhold the 14 cheques and documents "resumed" during the investigation, or whether they must be released to the petitioner.

Facts:

- The authorities conducted an investigation and issued a show cause notice on 8.07.2014.

- During the investigation, the authorities "resumed" certain documents and 14 cheques, as recorded in a panchnama (seizure memo) dated 22.01.2014.

- The petitioner sought the release of the 14 cheques, while the authorities argued that they cannot be returned as they were "seized" under the Customs Act.

Arguments:

- The petitioner argued that the cheques should be released, as they were not validly "seized" under the Customs Act.

- The respondent authorities relied on Rule 24 of the Central Excise Rules, 2002, and Section 110 of the Customs Act, 1962, to justify withholding the cheques and documents as they were "seized."

Key Legal Precedents:

- Section 110(1) of the Customs Act, 1962: Allows a proper officer to seize goods if there are reasons to believe that the goods are liable to be confiscated under the Act.

- Section 110(3) of the Customs Act, 1962: Allows a proper officer to seize documents or things if they may be useful or relevant in proceedings under the Act.

Judgement:

The court ruled in favor of the petitioner and directed the authorities to release the 14 cheques within two weeks. The key reasoning was:

1. The authorities exercised an undefined power of "resumption," which is different from the power of "seizure" under the Customs Act.

2. The authorities did not establish that the cheques were liable to be confiscated or relevant to the proceedings, as required for a valid seizure under Section 110 of the Customs Act.

3. The authorities cannot withhold the cheques in the absence of a valid seizure power.

4. The court ordered the petitioner to provide self-attested photocopies of the cheques to the authorities before their release.

FAQs:

Q1: What is the difference between "resumption" and "seizure" in this case

A1 : The court distinguished between the undefined power of "resumption" exercised by the authorities and the specific power of "seizure" under the Customs Act. The court held that the authorities did not have a valid basis for "seizure" in this case.

Q2: Why did the court order the release of the cheques?

A2: The court ordered the release of the cheques because the authorities did not have the legal power to withhold them, as they were not validly "seized" under the provisions of the Customs Act.

Q3: What conditions did the court impose on the release of the cheques?

A3: The court directed the petitioner to provide self-attested photocopies of the cheques to the authorities before their release. The petitioner also agreed not to dispute the veracity of the cheques if used as evidence by the authorities.

Q4: What is the significance of this case?

A4: This case clarifies the distinction between the power of "resumption" and "seizure" under the Customs Act. It also emphasizes the need for authorities to exercise their powers within the legal framework and not withhold documents or things without a valid basis.

1. On the previous date, I had asked Mr. Nijhawan, the learned counsel for the respondent to take instructions in respect of documents and cheques “resumed” by virtue of the panchnama dated 22.01.2014.

2. Mr. Nijhawan, learned counsel for the respondent says that a counter affidavit has been filed in the matter. Based on the stand taken in the counter affidavit Mr. Nijhawan says that the documents and the 14 cheques referred to in Annexure A appended to the panchnama cannot be returned to the petitioner, as they have been “seized”. For this purpose, the learned counsel relies upon Rule 24 of the Central Excise Rules, 2002 (2002 Rules) and the provisions of Section 110 of the Customs Act, 1962 (the Customs Act).

2.1 It is also the submission of Mr. Nijhawan that the petitioner has not been cooperating in the investigation and therefore the delay in prosecuting the case.

2.2 To be noted, show cause notice was issued in the matter on 8.07.2014.

2.3 There is also on record, as indicated above, a panchnama dated 22.01.2014. The panchnama clearly records that certain documents, which includes 14 cheques (as detailed out in Annexure A to the panchnama) have been “resumed”.

2.4 The provisions cited by Mr.Nijhawan come into play only when there is a “seizure” of goods. The goods, undoubtedly, as per the definition contained in Section 2(22)(d) of the Customs Act include currency and negotiable instruments.

However, the power of seizing goods, documents and things can only be exercised if the proper officer has reasons to believe that the goods in issue are liable to be confiscated under the provisions of the Customs Act. This clearly emerges upon a bare perusal of sub-section (1) of Section 110. Furthermore, in so far as documents or things are concerned, sub-section (3) of Section 110 makes it amply clear that they can be seized by a proper officer, only if, he is of the opinion that they may be useful for or relevant in proceedings under the Customs Act. No such case has been made out by Mr Nijhawan during the course of his arguments. There is, therefore, to my mind, a marked difference between the power of seizure adverted to in the Customs Act as against the undefined power of resumption, which has been exercised by the respondents in this particular case.

2.5 However, as indicated above, there has been no seizure in this case; at least not that of the documents and the 14 cheques referred to in Annexure A appended to the panchnama.

3. The learned counsel for the petitioner says that he would require those cheques to take suitable action qua the cheques in issue.

3.1 Having regard to the same, learned counsel for the petitioner, for the moment, confines his prayer for release of only the 14 cheques which have been resumed by the respondents.

3.2 I may only note, in this context, it is the submission of Mr.Nijhawan, that out of the 14 cheques only 5 are drawn in favour of the petitioner.

Furthermore, it is stated that none of the 14 cheques bear a date. I am of the view that none of what has been stated by Mr. Nijhawan can concern the respondent, once it is established that cheques in issue were not seized. Furthermore, return of cheques cannot, to my mind, stifle or impede investigation as is sought to be portrayed by Mr. Nijhawan. In the absence of power the respondent cannot withhold the cheques.

3.3 This apart, even if, one were to equate resumption with seizure (in so far as documents or things are concerned) the said power has to be exercised, with reasonable despatch. This is so as Section 110(3) of the Customs Act does not lay down any specific time frame, for which, seizure, can continue via-a-vis document or things.

3.4 At this juncture, I need not dilate on this aspect of the matter, as the petitioner has not pressed for release of documents referred to in Annexure ‘A’ of the Panchnama.

4. In these circumstances, the respondent is directed to hand over the 14 cheques to the petitioner. The respondent will, however, before doing so obtain self attested photocopies of the cheques from the petitioner. The statement of the learned counsel for petitioner made before me that the petitioner will not dispute the veracity of the said cheques if they are used as relied upon documents, at any stage of proceedings by the respondent, is also taken note of. The petitioner will be bound by the statement. The needful will be done within two weeks from today.

5. Rejoinder, if any, be filed within four weeks.

6. List on 18.11.2015.

7. Dasti under the signatures of the Court Master.

RAJIV SHAKDHER, J

MAY 27, 2015